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Legal Considerations of Starting an Online Business

Ayrora Temple
While one of the most costly aspects of developing your Internet business plan is the obtainment of qualified legal advice, the failure to do so can be even costlier. For some startups, however, the price of even a single hour with one of the industry's best attorneys is prohibitive — causing some prospective business owners to turn to industry message boards and/or the seminars offered at various webmaster gatherings for the extent of their "legal advice."

For these budget-minded operators and for others who will be seeking one-on-one counsel and want to know the right questions to ask in order to maximize their paid consultation time, a new educational option is now available — an informational DVD titled "Legal Considerations of Starting an Online Business."

Produced by and featuring attorney Dan Pepper of the Pepper Law Group (www.informationlaw.com), the disc offers an authoritative overview of several of the most important aspects of starting a new business, with a tight focus on Internet-based entrepreneurship.

"So you've decided to start your own Internet business. Now wouldn't it be great if you could find ONE source to learn about the legal issues you need to consider when starting this type of business?" Pepper's website promoting the DVD program asks and then quickly provides the answer: "Congratulations, you just found it!"

According to the PLG website, Pepper has represented dozens of online businesses and regularly instructs entrepreneurs on the techniques of forming businesses; using that experience to walk his video's viewers step-by-step through these important processes.

A substantial portion of the program is devoted to explaining the differences between sole proprietorships, partnerships, subchapter "C" and "S" corporations, and the "LLC" or limited liability company; and although this material may seem basic to some viewers (as it is intended to be), those without any formal business training will find it invaluable.

More knowledgeable viewers will appreciate Pepper's informative tips about how the structure that you use to form your company will affect your tax situation; your personal and business liability; your costs; and the level of management control, ownership and administrative ability that you'll have with each — including ways in which owners can help protect their personal assets from debts, lawsuits and other judgments.

Also covered are factors relating to the continuity and transferability of your business — vital considerations for those planning on selling their company someday — as well as the "double tax" problems associated with certain business entities.

Once you've setup your online business entity, it's time to build a website, and here Pepper provides ample advice that can save an unwary website owner anything from a few hundred dollars to the loss of their entire website, which they may not really own…

For example, among his selection of tips to ensure that you actually own everything in your website, Pepper advises the use of "work for hire" contracts with developers and others that may have a claim on "your" website — otherwise, your designer could be the real owner of the actual website (or at least its graphics, layout and the underlying code) — just as a photographer (operating without a work-for-hire specified contract) owns the photos he takes — whether you are the one paying him to take them and paying the models to pose for them.

Issues of joint authorship and the clearance of rights to graphical and other elements used by the designer which may be subject to someone else's copyright was also covered.

"Trademark law protects both businesses and consumers," Pepper said as he went on to detail the difference between copyrights, patents and trademarks; how registering them provides for maximum protection; ways in which these intellectual property laws can be used to help prevent others from "stealing your ideas, logo, text, graphics, and website;" and how these laws may apply to your domain name and/or your website's slogan.

One of the common misconceptions the attorney addresses involves the relationship between domain names, trade names and trademarks; and how the assignation of rights to one doesn't necessarily confer rights to the other.

The use of Website Development Agreements was also discussed, including the concept of "objective acceptance testing" as a tool for paying your website developer at logical milestones in the site's progress.

The subject of agreements received a lot more attention, shifting over to the "NDA" or nondisclosure agreement, which governs the sharing of confidential information, such as you might share with your developer or other party.

Pepper advises viewers to minimize the number of NDA's they enter into to help protect the secrecy of their projects. "The best way to keep a secret is not to tell anyone," he said. "You can't get the toothpaste back in the tube."

The essential ingredients of your website's terms of use and how to avoid some of the common mistakes operators make was also detailed. Pepper describes these terms as a contract between a website's owners and its visitors, governing who is allowed to use the website and what those permitted uses are. The impact of the Uniform Commercial Code (UCC), implied warranties, and other areas of concern are discussed; and a warning given about copying another website's terms of use to use on your own website — a seemingly popular practice that leaves owners with a false sense of security over a set of terms that may very well not cover their site — and to make matters worse, provides the evidence of your intentional infringement of someone else's copyrighted material …

Pepper also offered information on how the crafting of a site's terms can help its owners avoid some of the responsibility for what users post on a website.

"It is vital to incorporate site submission rules and limits of liability into the user agreement," Pepper said.

The attorney also went on to discuss how many privacy policy statements don't accurately reflect the site's information usage practices and the special challenges that COPPA legislation places on certain Internet businesses in order for them to comply with federal law.

Finally, Pepper stressed the importance of the human factor in a business enterprise.

"It all starts with you as the entrepreneur" he said, before discussing the value of mentors and the need for cultivating relationships as steps on the road to success.

As Pepper's website states, his DVD provides: "Practical, easy to understand tips you can use immediately to get your Internet business off the ground." After watching it, I have to agree. If you need some good, basic legal information to help plan and execute your own business, and a primer for discussions with your own attorney, then this DVD is for you. Check it out on Amazon.com today.

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